Lendy Enters Administration

Lendy Administration

It was announced late in the evening on 24/05/2019 that the P2P lending platform Lendy Ltd has entered voluntary administration. On a statement on the FCA’s website it has also been announced that the FCA themselves will run an inquiry it what caused the collapse of Lendy Ltd. The administration covers the three core companies of the Lendy platform: Lendy Ltd, Lendy Provision Reserve Ltd and Saving Stream Security Ltd. There are at least three other companies associated with the director of Lendy that are not covered by the administration. 

Many Lendy investors will see this administration as a realisation of the inevitable. Lendy has been in serious trouble for over 12 months, following a catalog of incoptenacies and miss truths it had all but destroyed confidence and support from its core lender base. This resulted in the secondary market place grinding to a halt, effectively locking in investors to loans. On the 11/03/2019 it was publicised that Lendy had been put on the ‘FCA’s Special Watchlist’ since January 2019 as concerns were growing about its ability to meet the minimum regulatory standards. Then on the 23/04/2019 Lendy notified lenders via it’s platform that it was experiencing banking issues, shortly after the FCA announced it was imposing further restrictions on Lendy’s operations. Lendy consistently claimed the banking issues were a technical issue and it was being resolved, however many lenders who are aware of how Lendy operates and the little regard it has towards it’s lenders, possessed the capacity to assume that these too events were inextricably linked, regardless of what Lendy claimed.

Other issues with the Lendy platform included, wildly over valued properties (which personally I hope will be looked into as part of the FCA inquiry). An almost total ineptitude/unwillingness/unpreparedness to handle and resolve problematic loans and recover securities. A seeming endless stream of monthly loan updates that in time proved to be irrelevant and non representative of the reality. A revolving door of staff appointments, particularly a number of high profile six figure appointments that seemed to last mere months. The threat of a direct legal action against the platform and all borrowers to the associated loans (that legal action has recently been thrown out of court, for being baseless).

For now the website remains live, I advise anybody who has not already done so to screenshot their loan holdings, account balance and download the Excel file while you still can.

Many Lenders have filled formal complaints to both Lendy and the FCA over the last 12 months so there is hope that the truth can be easily uncovered by the inquiry, however losses should be expected. On a personal note I am very fortunate that I have not lent new money through the Lendy platform (as published in a previous post) for sometime so my exposure is minimal, but my heart goes out to those that are significantly exposed especially those that have pension size investments tied up in this administration. Even worse are those lenders tied up in the Collateral UK fiasco too, (for I am too). This is the second sizable P2P platform failure in 12 months, Collateral UK circa £20 mil loan book, Lendy circa £200 mil loan book value. I have no doubt that this latest P2P platform collapse will force the wider P2P industry and the regulator to look in the mirror once again and ask what is going so wrong for this to keep happening.                                           

Collateral UK – Administration Update


A replacement of administrator

Collateral UK voluntarily entered administration on the 26th of February 2018 initially appointing an administrator by the name of Refresh Recovery. This appointment was quickly contested by the regulator (FCA) which paused the administration just a few weeks in to the process. After a court hearing on the 27th April 2018 Refresh Recovery (RR) were indeed removed from the administration of Collateral UK and were replaced by administrators BDO. The official reason given for the challenge in the appointment of the administrator, was that an appointment had to be authorised by the regulator (FCA), in this case the appointment was not authorised, therefore invalid. Refresh Recovery have subsequently filled for administration their-selfs on the 18th of July 2018.


The new administration

Once BDO were confirmed as administrator they set up an investor/borrower porthole for the release of relevant information. This includes any major progress in the administration process as well as periodic general FAQ’s, this information is publicly available to anybody who wishes to view it via the links above. On the 25th July 2018 it was decided the best way forward for the interest of lenders was to set up a Creditors Committee. This is a committee of at least three but no more than five individuals involved in the administrated company from a creditors perspective (in this case lenders). Thirteen nominations were received meaning a voting round had to be carried out to choose the maximum of five representatives. The five selected members of the Creditors committee were confirmed on the 23rd August 2018. There has been no further official update since.


The talk about town

Much of anything else released in the public domain about this administration at this time is potentially tinged with personal spin and interpretation. So I’m going highlight some of these rumours and attempt to put them in some kind of perspective.

Firstly there is the proposed administration cost, RR quoted an initial upfront fee of £48’000, sounds reasonable. BDO have quoted circa £550’000, now before you cause yourself an injury by falling off your chair, think about it. Collateral UK had quite an extensive loan book stretching across much of the country, now one might reasonably expect each of these developments would require at least one if not more site visits to ascertain the validity and state of the security to the attached loan. The work hours and travel expenses alone in performing this task would probably eat up much of the original RR quote. Then there are to name a few : lender communication expenses ; borrower communication expenses ; costs of maintaining the communication porthole ; costs of conducting potential sales of loans and parts of the business as a going concern ; costs of enforcing a security to gain a recovery ; compliance costs ; other legal costs. I could go on but when you actually consider the shear complexity of the Collateral UK loan book and the company as a whole, you could as lender start to think maybe you had a lucky escape from RR with a grossly underestimated administration cost.

The initial £48’000 quoted by RR for the administration was paid upfront before the legal challenge to the appointment. It has been rumoured but not confirmed in an official capacity that this fee was reimbursed back in to the administrated Collateral UK company. I’m inclined to believe this is probably the case as the appointment was found to be invalid by court process and a condition of the court ruling would likely have been the reversion of any fees paid.

There is another rumour around an approximate sum of £300’000 being removed from the company accounts at the directors discretion in the weeks leading up to the collapse of the company. This is by the far the most salacious rumour as it could well be considered embezzlement.

Definition of embezzlement

  1. theft or misappropriation of funds placed in one’s trust or belonging to one’s employer.

If, and it’s a big if, this was the case then embezzlement is of course a criminal offence. That in itself could well be leverage enough to return the funds if this has indeed taken place.

I have seen a figure banded about referring to a deficit between the loan book assets and lender/creditor/administration liabilities. With the loan book being valued at approximately £17.5 million and liabilities approximately £18.5 million leaving a deficit of approximately £1 million. Now i have no where near enough information to even attempt to explore this claim and I recall this was a claim voiced early on based on the initial release of preliminary figures. All I would say if that was indeed the case, it would equate to a potential 94.6% recovery, could be a down site worse.



Finally, where I stand personally on the state of the administration as an investor (lender). Yes its frustratingly slow and as investor I have ‘dead’ money tied up in the administration. Looking at it from the administrators side, this is undoubtedly a learning experience for them, all previous P2P company collapses have been tiny in comparison. If a traditional retail company with 2’000 employees collapses the administration is performed using well tested and a known legal processes and principles. The employees will then be compensated against liabilities evenly with what ever assets remain beyond the settlement of priority creditors (usually no more than a few dozen). This process can usually be wrapped up in 6 to 12 months.

With Collateral UK that equation is turned on its head, the company it’s self has a few employees but 2’000 (can’t recall the exact number but i think its broadly right) creditors/lenders. In the retail situation employees would tend to disproportionately loose out compared to creditors. In this situation maths would dictate that creditors would lose out somewhat because they are more exposed (there are more of them). Employees could stand to loose close to everything.

So I’m at least expecting a minimum of two years before anything close to a resolution (spring 2020). In terms of recovery, it’s a guess at this stage, like everybody else, but I would expect at least a small trim, anything better would be welcome news.

Collateral UK announces administration.

The UK based P2P lender Collateral UK announced today (28/02/2018) it has formally entered administration. The platform was taken offline on Monday 26th of February 2018 with nothing more than a ‘server upgrade’ landing page in it’s place. As speculation grew on forums over the next few days, from the plausible to out right ridiculous, as to the cause of this suspension in trading, a letter from the administrator was finally released late this evening.

The administrators letter cites the reason for the administration as ‘ The Company was operating in the belief that it was authorised and regulated by the Financial Conduct Authority under interim permission. It has transpired that this is not the case and consequently the Company has ceased lending ‘.

It is still very early stages in proceedings but it would appear invested capital will be secured and wound down in an orderly manner. However it is yet been clarified what will happen to cash on account, what will happen to investments not yet drawn down, what will happen to this months interest due tomorrow morning and if or when the platform will go back online. If the platform does not go back live, many investors maybe left scratching their heads in obtaining exact and up to date figures of what they have on the platform. This could cause difficulties with capital claims or tax filling.

Emotions are still raw at this time and it would unwise to speculate further on how this situation came about in the first place. Undoubtedly more will be revealed over the coming days and i will update accordingly. However some comfort should be taken from the fact this is by no means the worst case scenario, if played out as purported investor losses should be minimal if any.

This is exactly why all investments carry risk.